ATLANTA — There are many factors that have to be considered by anyone thinking about starting up a laundry business or looking to grow existing business.
The markets, financing, labor, levels of quality and service—each of these must be carefully investigated.
A trio of industry representatives—David Chadsey, vice president of sales for distributor TLC Tri-State Laundry Companies; Dr. Fontaine Sands, an associate professor at Eastern Kentucky University; and Bob Corfield, president and CEO of Laundry Design Group—discussed these topics during an educational session titled Starting a Laundry on a Shoestring here at this spring’s Clean Show.
Chadsey says that in the laundry industry, he sees a lot of ways to make a living with a washing machine.
“I have clients that do hospitality linen and they look at the healthcare folks and think, ‘If I could just do healthcare. If I could only figure out how to get my plant set up where I’m HLAC-accredited and so on, I could do healthcare,’” he says. “A lot of times, we’ll have healthcare plants, and they’ll have a hotel down the road that asks, ‘Can you do my linen? My finishing line is down.’ We’ve got a lot of different areas in our industry.”
However, Chadsey points out that those considering starting a laundry or growing their business need to understand who they’re going to be, the type of laundry they’re going to be.
“There are very distinct differences between being a hospitality plant and a healthcare plant,” he says. “There are distinct processes between healthcare or table linen. It’s not that if you do healthcare, you can’t do a couple tablecloths for your boardroom, but in the long term on a production scale, I think it’s very important to identify who you want to be and what you want to do.”
Corfield agrees. “You actually have to define what type of processing facility, what type of customer opportunity, what kind of work opportunities there are,” he says. “Each of them has a very different quality and service expectation.”
Corfield suggests looking at what’s in the marketplace, finding out what the opportunities are.
“Let’s put a scenario down here,” he says. “Let’s imagine we decided we’re going to go into the hotel or service business. I’m a dry cleaner and I’ve been providing valet service, and now I’m getting into laundry. I’m going to determine a couple things first. What type of laundry am I going to be? Are you going to be a rental service, where you own the linens and bed/bath product, or do you want to be a customer-owned goods (COG) processing facility? Then you have to think about transportation. You’ll need carts to collect the goods and move them back and forth, and you’ll have do a workload assessment.”
It’s at that point for Corfield, when a prospective launderer has an idea of what the opportunity is for them, including if they’ll process by pounds or pieces, the number of hours of operation for processing, then they can begin to get their arms around what type of plant and workstations will be needed.
But that’s not all that a prospective launderer needs to know, according to Corfield.
“Understand the quality expectations and service delivery expectations of your customers. What is the quality from a finishing standpoint? What’s the quality and number of counts? What’s the packaging? Do they want product wrapped, delivered in bulk? What type of expectations do they have?” he says. “Once you have all that in hand, then you can start understanding what your plant needs to look like in terms of space and equipment.”
Then, Corfield says, they need to look at utilities, water, electrical, airflow, and all the needs for the workspace. All that will provide a baseline. That will provide an idea of numbers and an idea of what will be cost-effective for actually getting into the business.
Of course, starting a laundry or growing a business takes one important thing—money. Prospective launderers need to do the research and have a plan in place to secure funding.
“I had a young man come by, and he was interested in getting into a laundry project,” says Chadsey. “When we were talking about equipment, talking about location, one of the issues that came up was financing. How was he going to fund it? There are some resources available within our industry to fund. Our company has some in-house things. I said that we would want to look at his business plan in order to talk about funding. He said, ‘I wasn’t planning on going to a bank, so I don’t have a business plan.’”
A business plan is not only important for funding, Chadsey says, but it’s also important for business operations. It’s what a company is planning to do.
“When you first get started in this endeavor, you may have a plan to work in a new table linen: ‘We’re going to work in 5,000 a day.’ Well, whatever your plan is, most likely three years from now, you started to do this, and then you ran into a hotel and they had all these towels they asked you to process. Things change.
“I think when you’re putting together a laundry, it’s really important to have a business plan, and that should include all of your capacities, the type of laundry you’re going to process, how are you going to deliver it to the customer. You need to put some financials in there as well. This is how we plan to reach this benchmark for revenue.”
Numbers, says Corfield, are vital in the laundry business. He compares laundry to baseball: The industry counts everything.
“We count production. We count productivity. We count rewash. We count stains. We count tears, the bags. It depends on your business,” says Corfield. “Those are all areas that you count that you can benchmark and produce more productive workspaces.”
A prospective laundry owner needs to have an idea of those numbers before getting into the business. For that, Corfield recommends thoroughly investigating the marketplace.
“Go into that plant. Go into the room, the location, the hospital facility that is requesting the service, and see what the current level of service is, what their expectation is,” he says. “See what the
level of service is, and the complexity of that service, to make sure that you can make decisions on taking that work, and designing your plant to move forward, that you’re understanding what your operation will be.”
For Chadsey, that understanding includes understanding what workforce will be required.
“One thing I see with smaller laundries wanting to grow is they’ll have a limited amount of employees, and these employees, in a hospitality application, they’ll work on wash in the morning, then in the afternoon they send it over to the ironer,” he says. “In healthcare, that sheet might not have to be perfect, and you really don’t want that washman going over and working that ironer unless he has taken off that personal protective equipment and has washed up.
“Different plants have different policies for that, but if you’re growing, you have to think about having people at different stations. You want to keep that functional situation as much as possible.”
Speaking of healthcare, Sands stresses that prospective healthcare launderers need to know that if they’re going to do healthcare laundry, even if they have an establishment, there are structural changes they might have to address. That could include physically separating the clean side from the soiled side. She says that they need to know that type of thing up front, so that in the business plan they can adjust for those variables.
“On the clean side, you have to think, ‘I’m processing and I have to have quality and my process works every single time so that what I say is hygienically clean for this healthcare institution is hygienically clean and it needs to stay that way all the way through delivery,’” she says.
“Healthcare is a very different animal from a hospitality laundry,” says Chadsey.
He notes that there are many different opportunities in the market, such as acute care, long-term care or other clinical areas, such as doctors’ offices. However, Chadsey stresses that the definition of quality in healthcare is much different than it is in hospitality.
In the same vein, the definition of quality is different in table linen than healthcare and hospitality.
“Because the standards are different and quality is different, oftentimes that means a difference in the processes and the equipment used,” he says.
Not only are there different markets, Corfield points out, there are also different types of laundry businesses that one considering entering the field will have to consider.
“If the customer owns their own linens, you’re going to be a laundry processing site,” he says. “Then there’s the competitive rental business. You own the linens, and you’re providing linens as a rental service. They’re really two different businesses.”
Corfield says that most plants do one or the other type of business. Once a rental business owns the linen, he says that it can “normalize” processes. These include controlling the operating hours of the week and day. This is because the customers aren’t getting the same towels they had last week; they’re getting the towels that are next in line to be returned to them.
“When you’re doing COG processing, you now do what is called batch processing,” Corfield says. “When you bring the shirt into your plant, it goes all the way through your plant. That shirt is the shirt they get back.”
The challenge in COG is this, according to Corfield: The customer has to maintain enough inventory on hand for the laundry to do its job properly and in a reasonable amount of time. That includes pick-up, transport, processing and delivery.
That being said, Chadsey says, “Rental is very difficult to do on a shoestring [budget]. COG gives you the opportunity to grow on that investment. A lot of times, a hotel might have their own laundry and are thinking about sending it out, even hospitals. In that consideration is how many par do they actually keep. Maybe they have three par and they need to buy another par to process it on their own. If you can process three par, that saves them from spending money on another par.”
There are a number of studies that have been published, says Corfield, but basically they all come down to the same thing: Businesses need to understand their cost of sales and cost of operations.
“It’s not difficult to get to the baseline cost,” he says. “It’s difficult to manage it effectively.”
Have a question or comment? E-mail our editor Matt Poe at [email protected].